Are you prepared for the new ASX T+2 settlement cycle?

On Monday 7 March 2016, the ASX will move to a T+2 settlement cycle (trade date plus 2 business days). From this date, settlement of your share transactions will take place two business days after the trade is conducted.

What is settlement?

When you buy or sell financial products (including shares, bonds and ETFs) you exchange legal ownership of those products for money. This exchange is called settlement. The ASX currently operates on a T+3 settlement cycle (trade date plus 3 business days). With the introduction of a T+2 settlement cycle, settlement will occur one day earlier.

Why is it changing?

Since 1992, the ASX has improved the settlement cycle from T+5 to T+3, and soon to T+2. A shorter settlement cycle keeps our market globally competitive, reduces risk and improves efficiencies for everyone involved in the market. It also means you receive both the proceeds of your sales and delivery of your purchases sooner.

How does this affect me?

A shorter T+2 settlement cycle means we need to make some changes to the way we receive payments from you:

Cheques – from 1 February 2016, we will no longer be able to accept cheques for regular settlement. This is because the clearing time for cheques is too long to be able to deliver cleared funds by the settlement day under a T+2 settlement cycle. Cheques will still be accepted for payment pre-trade in sufficient time for the funds to clear and we will still happily deposit cheques to your linked Cash Management Account for dividend payments, rollovers etc.

B-Pay – If using B-Pay for your settlement, you will need to initiate payment no later than one business day after the trade date (T+1) to ensure Argonaut receives the cleared funds in time for settlement on T+2 (trade date plus 2 business days).

Direct Bank Transfers – If you transfer funds directly into our bank account, you will need to make this transfer no later than one business day after the trade date (T+1) to ensure that Argonaut receives the cleared funds in time for settlement on T+2 (trade date plus 2 business days). “Pay Anyone” transfers are usually transferred overnight. You can organise a same day transfer, but your bank may charge you an additional fee for this.

Issuer Sponsored Holdings – From 1 March 2016, we must have your SRN upfront when your order is placed. Please ensure you have this on hand when you contact your Adviser.

What can I do to prepare?

To prepare for a T+2 settlement cycle and to allow us to improve the service we’re able to offer you, there are a few things you can do:

Set up a Direct Debit and Credit Facility - By providing Argonaut with your bank details and authority to directly debit and credit your account we can:

Debit your nominated bank account for any share purchases in time for settlement. This will reduce your risk of incurring late payment penalties;

Link your eligible Cash Management Account (CMA), so we can see available funds in real time; and

Arrange direct credit of all dividend payments into your nominated bank account (if you have a CHESS sponsored account).

Become CHESS Sponsored – When you become CHESS sponsored, all your shares are held under one unique identification number (rather than separate numbers, as with Issuer Sponsored holdings), which is more secure, efficient and cost effective. The process to become CHESS sponsored is simple. Talk to your Adviser about how to get started.

Provide Us With Your Email Address – Once we have your email address on file we can:

Deliver trade confirmations to you on the day of the trade;

Provide online access to Argonaut’s Client Area, where you can view share prices, access Argonaut’s wealth of research, monitor your investment portfolio(s) and set up company watch lists;

Deliver documents such as financial services guides, prospectuses, product disclosure statements, terms of business, statements of advice, trade confirmations, periodic statements and other information permitted to be disclosed electronically by law; and

Reduce the impact of our business on the environment by using less paper and ink.

For further information regarding the change to T+2 settlement, the ASX has published a brochure “Transition to T+2 Settlement” which can be accessed by clicking here.

If you have any questions regarding T+2 or any other aspect of your account, please contact your Advisor.